Deborah O'Neill (NSW, Australian Labor Party, Shadow Assistant Minister for Innovation) Share this | Link to this | Hansard source

Labor supports the Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018. This bill implements a number of sensible amendments to improve the integrity and operation of the consolidation regime. The bill implements recommendations made by the Board of Taxation in 2012 and 2013 and reflects consultation carried out by Treasury and by the Board of Taxation.

In Australian taxation law, the consolidation regime applies primarily to a wholly owned group of Australian resident entities that chooses to form a consolidated group for income tax purposes. A consolidated group generally consists of an Australian resident head company and all of its wholly owned resident subsidiaries. Specific rules also allow certain resident wholly owned subsidiaries of a foreign holding company to consolidate by forming a multiple-entry consolidated group.

Schedule 1 of this bill amends the Income Tax Assessment Act 1997. It does so to improve the integrity and the operation of the consolidation regime by implementing the following measures. These measures, except for the deferred tax liabilities measure and the securitised asset measure, were originally announced by the former Labor government in the budget of 2013-14. The application of the securitised asset measure to ADIs and financial entities was announced by the government in the 2014-15 budget. The deductible liabilities, deferred tax liabilities and extension of securitised assets measures were announced in the 2016-17 budget, and these measures had been agreed to in principle by the former Labor government.

Historically, the consolidation regime was introduced in 2002. The Board of Taxation commenced a post-implementation review of certain aspects of the consolidation regime in 2009. As a result of its review, the board presented two reports in 2012 and 2013. This bill implements recommendations made by the Board of Taxation in these reports to improve the integrity and operation of the consolidation regime. It also implements other changes which are consistent with the board's recommendations. Treasury conducted two rounds of public consultations and returned to the Board of Taxation when some stakeholders raised issues that had not been raised with the Board of Taxation. I'm pleased to say that no stakeholders have raised substantive concerns with the final legislation.

The various measures and their start dates are as follows. The first is the deductible liabilities measure, from 1 July 2018, which will remove a double benefit that can arise in respect of certain liabilities held by an entity that joins a consolidated group. The second is the introduction of the deferred tax liabilities measure of 15 February 2018, which will simplify the operation of the entry and exit tax cost-setting rules by ensuring that deferred tax liabilities are disregarded. The third is the securitised assets measure of 13 May 2014, which will remove anomalies that arise when an entity joins or leaves a consolidated group where the entity has securitised an asset. The fourth is the churning measure of 14 May 2013, which will switch off the entry tax cost-setting rules for a joining entity where a capital gain or capital loss made by a foreign resident owner when it ceases to hold membership interests in the adjoining entity is disregarded in certain circumstances. The fifth is the taxation of financial arrangements measure of 1 July 2010, which will clarify the operation of the TOFA provisions when an intragroup asset or liability that is or is part of a division 230 financial arrangement emerges from a consolidated group because a subsidiary member leaves the group. And sixth is the value-shifting measure of 14 May 2013, which will remove anomalies that arise when an entity leaves a consolidated group holding an asset that corresponds to a liability owed to it by the old group because the value of the asset taken into account for tax cost-setting purposes is not always appropriate.

In some instances transitional rules ensure that taxpayers who've entered into arrangements prior to commencement are not disadvantaged, are not able to obtain windfall gains or do not have to change a position they have taken under the current law. The current changes that are proposed in this legislation are technical in nature. They remove unintended benefits of the consolidation regime and are the result of rigorous consultations and work by the Board of Taxation on matters engaged with and by previous Labor governments. Labor is happy to support this bill, which continues the integrity work on the consolidation regime that began under the previous Labor government.

Anne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Link to this | Hansard source

I thank senators for their contribution and commend the bill to the Senate.

Deborah O'Neill (NSW, Australian Labor Party, Shadow Assistant Minister for Innovation) Share this | Link to this | Hansard source

Can I just clarify the date of the deductible liabilities measure. It's from 1 July 2016?

Anne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Link to this | Hansard source

Yes.

Question agreed to.

Bill read a second time.